A Project Requires an Initial Investment of $150

question 13

Multiple Choice

A project requires an initial investment of $150. Your research generates the following estimates of revenues and costs (there are no taxes) :

The cost of capital equals 10 percent. Assume that the cash flows occur in perpetuity. Conduct a sensitivity analysis of the project's NPV to variations in costs. (Answers appear in order: [Pessimistic, Most Likely, Optimistic].)

• A)+50, −100, +400
• B)−50, +300, +500
• C)−100, +150, +350
• D)+100, +150, +200

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Definitions:

Two Groups

Refers specifically to an experimental design wherein participants are divided into two distinct groups, often an experimental group and a control group.

Separate Control Group

A group in an experiment that is not exposed to the treatment or intervention and is used as a benchmark to measure the effects of such treatment.

Regression Toward the Mean

The statistical phenomenon that high or low scores naturally tend to move closer to the average over time.

Extreme Scores

Values in a data set that are significantly higher or lower than the majority of the other scores, potentially skewing results.